The day before Lyft closed its own rental business and laid off nearly 60 employees, the team responsible for the program was swallowed up by what they believed to be a much bigger problem.
In June, the rental team had tried to get the service up and running in New York, but without success. The launch was repeatedly delayed and for various reasons, including the need to get a new insurance company in the state. But even after the new insurance policy began July 1, Lyft still hadn’t opened its New York rental business, leaving the team with questions, according to sources who spoke to TBEN on condition of anonymity.
The leadership eventually told the team that it was aiming entirely for New York and would instead shift operations to opening the internal rental program in Austin, where there are fewer regulatory hurdles.
Within three weeks, Lyft executives would shut down the entire hiring program, leaving employees scrambling to find other positions within the company or risking losing their employment status altogether. Lyft also announced that about 60 employees would be laid off.
The layoffs came just ahead of Lyft’s second-quarter results, to be released Thursday. The earnings call could provide more clarity on the company’s direction and whether further cuts are expected.
During the failed launch attempt in New York, alarm bells went off for at least one employee, who spoke to TBEN on condition of anonymity. Seeking peace of mind, the employee stuck to Lyft co-founder and president John Zimmer’s comments at a company-wide meeting in May when he spoke about reprioritisation, hiring delays and budget cuts, assuring everyone that layoffs weren’t being considered.
What happened next surprised many employees. Employees received an email on July 19 from Cal Lankton, VP of fleet and global operations — which TBEN has reviewed — informing them that Lyft had completed its reprioritisation after its first quarter earnings call and had decided to shut down its internal rental program. and continue to provide a similar service through its partnerships with Hertz and Sixt.
The email also stated that Lyft would consolidate some regions in global operations and centralize its market operations team — mainly on-site operations such as driver support and vehicle service centers. Lankton said two locations — the San Francisco Vehicle Service Center and the Detroit Hub — would be closed.
“We have worked hard to place as many team members as possible in other roles in the company,” Lankton wrote in the email sent to employees. “However, not everyone has a role in this new structure. In response to this announcement, affected team members in the Lyft Rentals and Global Operations central teams will receive a calendar invite at 10:45 a.m. PST to learn what this means for their functions.”
Most of the 60 affected employees found out through a memo. Meanwhile, hourly workers working on the ground at local service centers found out when they got to work and were told to go home, according to a source.
Ten minutes after the salaried workers received the initial memo, they received a follow-up email from Lyft rental chief Henry Imber, explaining a bit about what the winding down process would look like and inviting the team for a video conference call.
Stunned and shaky, the team joined the call and was told they would have 30 days to find a new position within Lyft or break up. HR said they would provide help with hiring, but didn’t provide details on what that would look like until they faced opposition from staff.
The team members wanted to know if they would be placed in new roles or at least given preferential treatment. HR said the fired staffers would not be placed in new roles, but their resumes would be placed on the recruiter’s desk.
The dismissed employees were offered a 10-week severance payment, a lump sum that will be awarded on August 19, their last working day.
Lyft did not respond to a request for comment. TBEN will update the article if the company does.
What’s next for Lyft?
Since the news of the layoffs, Lyft has helped the team polish resumes, prepare for interviews and LinkedIn consultations, as well as speed up interviews for positions within the company. But disappointment remains for staffers who feel they should simply be placed in new roles, rather than compete with outsiders.
“The mood is pretty sour,” said a Lyft employee. “It’s pretty solemn, but everyone has been professional.”
According to Lyft’s jobs page, the ride-hail company is taking on several divisions, particularly in marketing, operations and product.
It’s not clear where the freed-up funds will go now, but they’ll likely go back to Lyft’s core ride-sharing business. In times of excess, companies often feel galvanized to start up new, perhaps risky, business lines. But when the company or the economy, or both, take a nosedive, it’s common for those same companies to return to their original mission. Lyft started its rental business in December 2019, just after Uber shut down a similar business and just before the pandemic ripped through the world and the balance sheet of Lyft, which still hasn’t fully recovered.
A Lyft employee who spoke to TBEN said the company’s first-quarter call has “triggered this whole kind of panicky, reactionary decision-making.”
In the first quarter of 2022, Lyft posted strong gains in terms of active riders and revenue per rider compared to the lows of the first COVID wave, but the company also reported a notable decline in revenue per rider compared to the level of the fourth quarter of 2021, as well as a second quarter of consecutive declines in active ridership.
Investors were shocked by an unclear growth path in the short term. Shares of the company fell more than 12% in after-hours trading that day and have only fallen further.
At the time of writing, Lyft stock is trading at $16.71, down from $21.56 on May 4, when Lyft reported first-quarter earnings. The weakened stock performance also affects the laid-off employees who were given a stake in the company as part of their compensation. They got a special stock exchange because of the stock drop, but that won’t do much if the company’s stock continues to tank.